What Is Marketing Risk?

What Is Marketing Risk?

Regardless of the best planning and execution, there will always be risk associated with marketing and marketing projects. Marketing relies on predictions about customer behavior, creative assumptions about the type of messaging your target audience will respond to, and some trial and error when it comes to pricing. Marketing risk is the potential for experiencing a failure with one of the main marketing functions or incurring a financial loss due to a marketing activity that was unsuccessful. 

Marketing risk can occur at any point along the line of marketing functions, but they are most likely to occur with regard to the following:  

• Pricing: Pricing falls under the purview of the marketing department, and setting your product at the wrong price can create a risk of financial loss for your company due to a competitor offering a lower price. 
• Promotion: The main promotional activities we usually associate with marketing are all areas where risk could be involved. Choosing the wrong channel to advertise to your target audience, landing on the wrong messaging for that target audience, or even inadvertently offending a segment of your audience are all risks marketing departments run when planning and executing promotions. 
• Distribution: If a product is delayed in production or a service is delayed due to a problem with a vehicle in your fleet, this falls under the umbrella of marketing risks because it will impact the ability of products to get into the hands of customers. 
• Reputation: With the rise in social media and review sites, marketing departments run the risk of a customer voicing their dissatisfaction with your products, services, sales department, or customer service in a way that could harm your reputation or your brand.
• Employees: At any point, a marketing department could lose a key member of their staff, either temporarily or permanently, which could impact any phase of marketing execution from sales to event management. 
• Operations: Any of the core processes of the company’s business could shift and impact marketing activities. This could involve an investor pulling out of a project or a factory experiencing a natural disaster like a flood or storm.  

While many of these issues might seem unpredictable, many of them can actually be mitigated by the process of marketing risk management. Marketing risk management seeks to identify potential risks and come up with potential solutions so that marketing teams aren’t severely impacted by them if they arise.